Canadian non-alcoholic beer maker Partake Brewing has raised $4 million in the company’s first institutional funding round, which was led by San Francisco-based CircleUp Growth Partners.
In addition to CircleUp, Export Development Canada (EDC), Natural Products Canada, McLean & Associates and Barrel Ventures took part in the Series A funding round.
Partake, founded in 2017 by Ted Fleming, is among a new generation of non-alcoholic beer brands looking to resurrect what was once an afterthought within the beer industry.
After three years of “bootstrapping,” Fleming told Brewbound that now was the right time to take the investment in order to “really tackle the U.S. in earnest.”
“For me, the advice I received early on was go as far as you can go, scratch, claw, do whatever you have to do to go as far as you can without taking outside money,” he said. “And I did that for three years. We built a multi-multi million dollar business in two countries.”
Fleming said he financed the company’s first three years with $300,000 Canadian ($225,000 in the U.S.). In that time, the company has grown to 10,000 barrels of annual production, with the potential to double or triple its production over the next 12 months.
Fleming said he maintained a “substantial part of the equity” and there are likely to be one or two more rounds that would leave him in control of the company. He declined to go into specifics on how much equity he maintained.
In order to take Partake to the next level though, Fleming said it was clear that the company would need additional financial resources. He also said he anticipated increasing competition from larger craft breweries entering the space, as well as existing dedicated non-alc beer brands. That foresight came to fruition on Tuesday as Boston Beer Company announced that it would launch a non-alcoholic, Samuel Adams-branded hazy IPA, Just the Haze, in 2021.
“To compete in the U.S. market, we needed to be more capitalized and then we were,” he said, adding that the $4 million funding round is likely to be the start of a series of rounds.
“There’s lots of opportunity for us down the road,” he said. “This was kind of our training wheels set of funding, if you will, just to get some additional traction into the U.S., and then, looking ahead to be able to prove out how we are successful there, and then be able to expand that into a larger geography and into more channels.”
Fleming said the investment will go toward expanding in the U.S., including several key hires such as VP of marketing, director of sales and operations, and territory managers.
“We could see our U.S. team expanding to seven to 10 in the next 12 months and maybe then even doubling from there if we’re successful in the following 12 months,” Fleming said.
In the U.S., Fleming said Partake sees the opportunity for the business to be 10 or 15 times what it is in Canada.
“We think fundamentally the market can go from half a percent of the overall beer market to 1%, 2%, 3%, and that provides room for us, as well as entrants potentially like Boston Beer and others.”
Currently, 75% of Partake’s sales are made in Canada, with the remaining quarter in the U.S. Partake’s offerings are sold in Whole Foods in the Pacific Northwest and all Total Wine stores. More distribution announcements will be made in the coming months.
Partake’s offerings, which check in at 10 calories per 12 oz. can, are contract produced in Calgary and Toronto, and the company is exploring contract production within the U.S.
“We’re looking to keep our options open for potential strategic partners down the road should someone come to us and say, ‘Hey we want to partner with you and produce your product in the U.S.,’” he said. “We want to have that flexibility to go there. I think that’s another potential avenue for us down the road.”
In March, Stratford, Connecticut-headquartered Athletic Brewing Company announced it had closed on a $17.5 million Series B funding round, bringing its total capital raised to a little more than $20 million, from more than 60 angel investors. Athletic also opened an 80,000 sq. ft. production facility in the former Ballast Point “Trade Street” facility in San Diego.
A growing number of challengers have emerged within the non-alcoholic beer segment, including Boston Beer Company, which announced Tuesday plans to launch Just the Haze IPA, a Samuel Adams branded 0.5% ABV beer in 2021.
Partake and Athletic are among a handful of independent brands producing non-alcoholic beers, including Ceria Brewing (Arvada, Colorado),Wellbeing Brewing (St. Louis, Missouri), Surreal Brewing (Campbell, California), and Hairless Dog Brewing (Minneapolis, Minnesota), among others.
Larger craft brewers have also gotten into the non-alc trend, including Brooklyn Brewery with Special Effects.
Heineken’s 0.0 brand was among the bright spots for the company last year, and Heineken-owned Lagunitas Brewing Company has also found success with its Hoppy Refresher, an “IPA-inspired” non-alcoholic hopped soda with zero carbs and calories.
Anheuser-Busch InBev has also launched a new non-alcoholic beer, Budweiser Zero, with retired NBA star Dwyane Wade.
CircleUp has previously invested in the beer space in San Francisco-based Fort Point Beer Co.